The Big Interview: David Forde, Heineken UK

I’d simply asked a question about beer duty, and whether Forde thought the recent penny cut and scrapping of the escalator signalled a new era of support from the
Government towards the beer and pub sector.

"The politicians must be laughing at us," he says, suddenly all serious. "We got excited about getting off the beer-duty escalator after a 42% increase in tax, and we are chuffed because the Government gave us 1p off. They’ve conditioned us to be grateful [for small mercies], and we’ve let down the consumer.

"What has our lobbying actually achieved? A 42% increase in beer duty." Forde suggests that, if we were giving ourselves an appraisal, we might be critical of our efforts to date. Right now — as someone who enthusiastically joined in the cheerleading for the duty cut — I’m not sure I’d want an appraisal from this openly challenging man.

"We need to redefine our definition of success," he insists. "What are we aiming for, where do we want our beer duties to be? Excise is outrageously high, and the economics don’t even stand up. But we’re seen as a soft touch."

Forde says the industry has made the classic mistake of talking too much to politicians, and not enough to customers. "Politicians respect businesspeople, but they fear consumers," Forde says, adding that respect alone is no good.

"Until we get consumers concerned about beer tax we won’t get a real change in duty. But consumers don’t understand the level of tax on a pint — and that’s our fault."

Forde warms to his theme about the industry’s failings as we move on to discuss product quality.

Product quality​

"I’m still disappointed with product quality in the on-trade," he laments, estimating that at least 30% of beer serves are substandard — often not in branded glassware, presented at the wrong temperature or with a non-existent head.

"We underestimate the difficulty of maintaining quality from the brewery gate to the consumer’s lips. I’m devastated when I see heads of beer collapsing because people use the wrong rinse aids and detergents that are beer killers."

Forde claims the pub trade is not sufficiently obsessed with delivering a quality beer experience — noting that it seems much more concerned with perfecting coffee, cocktails, wine and cider serves.

"The most important category for the on-trade is beer, and we get it wrong. We’ve taken the category for granted. Beer quality is not sufficiently high up the agenda, and it’s too far down the to-do list. There’s no burning platform."

Forde says that when challenged to improve beer quality, licensees often say: "People don’t complain." But he warns that the pub trade must make its customers more comfortable about demanding excellence in beer. "We haven’t taught them to send back a bad beer. They’ll do it with a steak, and even a coffee, but not a pint."

He gives an example to illustrate his point. "Two guys get jobs with a pub company — one as a barista, one a barman. The barista gets two weeks’ training, the barman gets
two minutes.

"On coffee, the cafés next door have forced us to up our game. But we don’t have that same competition with draught beer."

All he’s demanding from a ‘Star Serve’ is: rinse, pour, skim, check and serve, with eye contact and the brand’s logo facing out. "’But we’re too busy,’ people say. Too busy? A mojito takes 10 minutes!"

He estimates there’s potential for a 7% revenue increase with the Star Serve, before quickly adding that it’s not really about that. "It’s about respecting and delighting the customer. Otherwise they’ll drift away from the on-trade."

Forde is clearly a passionate man. He loves pubs. And he wants them to succeed. That much is obvious from the time we spend together, chatting about all aspects of the pub trade in the UK and his native Ireland.

Passion for pubs​

"British pubs are a fantastic proposition," he says, pointing out that Heineken, via Star Pubs & Bars [the name of Heineken’s leased pub business], owns a significant number of them. Nowhere else in the world does the multinational brewer own such a substantial pub estate, and nowhere else in its business does it have the same level of operational expertise — which can be shared with colleagues across the world in their pursuit of selling more beer.

"When you enter a great pub you step into a world of cosiness, comfort and conviviality — and some pubs do that beautifully," enthuses Forde.

"But lifestyles have changed — from a time when homes were modest and there were very few TV channels. Fast-forward 25 years to an era of open-plan living, broadband internet etc, and the home has become a much more compelling proposition.

"Some retailers haven’t changed quickly enough. They’ve been too busy consolidating and building their empires instead of speaking to customers. You still see that today. But a punter doesn’t care about finance and securitisations; he cares about the landlord, the barstaff and good value."

Forde believes the industry re-mains overpubbed. "We’re getting there, but we haven’t hit ground zero yet. There will be further contraction. But lots of innovation too. And there will be winners and losers."

The Star Pubs & Bars business feels like it is winning, Forde says, despite political doubts about the tenanted and leased model. "We have 1,340 pubs, and 1,340 lessees who want to do business with us. There’s no net and no shackles. They come to us, we put our terms and conditions on the table and they choose."

The rebranding exercise that saw Scottish & Newcastle Pub Company change its name to Star Pubs & Bars in November 2012 was presented to the trade as more than just a new logo — a concerted effort to highlight the pubco’s links with Heineken, and emphasise its readiness to do business with talented lessees. "The Heineken trademark is blue-chip; people know we won’t disappear," says Forde.

He reports that it’s becoming more difficult to get a Star pub — and that’s a good thing. The company is attracting more interest from potential tenants, and is, therefore, able to scrutinise their applications more closely. "We’ve always been on people’s shortlists, but maybe now we’re further up that list," he adds.

There is no great desire within Star to develop new tenure models, though Forde says it will always be flexible in its terms for the right partner. "We’re a reasonably liberal pub operator in terms of the tie. Beer and cider is core in that, but the range is fantastic," says Forde, before launching excitedly into a discussion on product innovation.

Product innovation​

"The level of innovation in our markets is unprecedented," says Forde. "It’s great to be a consumer now," especially compared to 25 years ago, when product development and range was pretty uninteresting.

He points to the cider market — in which Heineken is well represented with Strongbow, Bulmers, Woodpecker, Symonds, Jacques and Scrumpy Jack — as an extraordinary battleground for research and development. "Cider drinkers seem to absorb innovation faster than any other," he says, musing that its consumers are more open-minded, perhaps on account of their age (younger) and gender profile (more female). Berry cider has a particular appeal to rosé wine drinkers, Heineken finds.

There are some interesting developments in the beer market too, Forde insists. Spirit beers (or ‘speers’ as they are becoming known) — like Desperados — "take us into the world of late-night bars and clubs where a pint of beer struggles", he says.

All this innovation is great for the consumer, and presents opportunities to pubs and bars, but what does Forde make of accusations that brewers like Heineken pay lip service to the on-trade, while supplying slabs of tinned beer to the supermarkets to be sold at 50p a can?

Pricing and promotions​

"It’s just business," he says, matter-of-factly. "We’re not in control of their pricing and promotions. The UK supermarkets are very competitive, and will be aggressive across all their categories. It surprises me that someone wants to make a loss on a product, but they can afford to do it.

"You could say the same thing about steak," he argues. "Two pieces of steak, they come from each arse cheek of the same cow," but one is sold cheaply in the supermarket and one in the pub for five times
the price.

"It goes back to the pub experience," says Forde. "It’s an experience, not a product, and you have to sell it. The day we make it a price comparison, we’ve lost. Factor in the cost of the taxi, the babysitter etc. Where do you draw the line?

"We need to amplify the experience and stop taking our customers for granted," he urges. "Are they feeling the love?

"Are they?"

It looks like it’s time for that appraisal after all.